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This chapter will provide a brief introduction to the law on spousal support. The chapters which follow will explore the principles of spousal support in more detail, including the new Spousal Support Advisory Guidelines and calculators for the formulae set out in the Advisory Guidelines. This chapter also looks at what happens when a person entitled to receive support goes on social assistance, and reviews the income tax consequences of spousal support payments. An Overview of Spousal Support
Spousal support is the payment of money by one spouse, the "payor," to the other spouse, the "recipient." Spousal support is paid to defray the recipient's living expenses and help him or her get by as a single person who no longer has the benefit of the payor's income and other contributions to the household that the person enjoyed while the parties lived together. No matter if one spouse was working during the relationship or both worked, the fact is that during the relationship there was only one mortgage payment to make, only one hydro bill and only one cable bill. After the relationship ends, there are two rent cheques, two hydro bills and two sets of groceries to buy, all of which must be paid out of the same amount of income which supported the family before separation. That being said, neither common-law relationships nor marriages are life-long pension plans. Following the end of a common-law or married relationship, each party has a duty to become independent and self-sufficient as soon as possible. Bear in mind the words of the British Columbia Supreme Court in the 1997 case of Dumais-Koski v. Koski: Or, as the Alberta Court of Queen's Bench commented in the 2005 case of V.S. v. A.K.: A party who is self-sufficient or is capable of becoming self-sufficient at the end of a relationship will not usually be entitled to receive spousal support. Spousal support is available for married spouses under both the federal Divorce Act and the provincial Family Relations Act. Spousal support is only available to unmarried couples under the Family Relations Act. Unmarried partners can seek an order for the payment of spousal support if: Spousal support is available for same- and opposite-sex married and common-law couples. There is not automatic requirement to pay spousal support the way there is for child support. As a result, the entitlement of a spouse spouse to receive support will be decided on the particular circumstances of that spouse and his or her relationship with the other spouse. In general, the court will take into consideration the following factors, among many others: Once someone has proven that they have an entitlement to receive support, the question turns to how much support he or she ought to get. Broadly speaking, the amount of an order for spousal support is calculated by looking at the disposable income of the payor and the actual needs of the recipient. If a payor has a gross income of, say, $2,000 per month, and of that money $1,500 is spent on child support, housing costs, utilities and so forth, the payor's disposable income will be $500 per month. Spousal support will usually be paid out of that $500 per month if it's payable at all. Sometimes there is simply not enough money coming in to cover child support, the payor's day-to-day needs and the day-to-day needs of the recipient. In a case like that, child support will take priority over spousal support, and the amount of spousal support paid simply may not suffice to cover the recipient's needs. The parties will have to share in the financial consequences of the end of their relationship. In general, however, the court will not force someone into bankruptcy to provide support for the other party, although there are times when a support order will result in the payor racking up debt. Spousal support can also be calculated using the draft proposes Spousal Support Advisory Guidelines. The Advisory Guidelines is an academic paper released by the federal Department of Justice which sets out two basic formulae that calculate the amount of support that should be paid based on each person's income and the length of their relationship. Once a person's entitlement to receive spousal support has been established and the amount of support payments has been fixed, the next issue to look at is the length of time for which these support payments should be made. For people in long relationships, spousal support might be paid permanently. For people in shorter relationships, particularly where the recipient is either working outside the home or capable of working outside the home, support might only be payable for a fixed length of time. There are ways that an order or agreement for spousal support can deal with the issue of time: The Advisory Guidelines formulae will also provide a range of time for which spousal support should be paid, in addition to calculating the amount of support which should be paid. It is almost always possible to apply to change a court order for spousal support or to renegotiate an separation agreement that requires the payment of spousal support. People receiving spousal support might want to change an order or an agreement if: People paying spousal support usually want to change things if: If the parties can't agree about if or how a support order should be changed, they will usually have to make an application in court to "vary" the order. Couples with an agreement usually try to negotiate a change before they go to court. Back to the top of this chapter. Spousal Support and Social Assistance
If you are applying for social assistance or are receiving social assistance, you may be required to sign a form that allows the ministry administering BC Benefits to take whatever steps are required to collect spousal support on your behalf and, sometimes, keep the whole of the spousal support it collects. This is called "assigning" your spousal support rights to the ministry. The point of this is to allow the provincial government to recapture some of the money it spends supporting a recipient of social assistance from someone else who would normally have a legal responsibility to support that person. The collection of spousal support payments for people on social assistance is run by the "Family Maintenance Program." (This is a different organization than the "Family Maintenance Enforcement Program," or FMEP.) FMP has the authority to pursue spousal support and can apply for new orders for spousal support, or apply to change old orders for spousal support, as it sees fit. If you are legally entitled to receive spousal support, FMP may bring an application for an order requiring your spouse or former common-law partner to pay support to you. You will not have a say in the matter if FMP decides to do this, and, so long as you might be entitled to receive support, FMP may bring on such an application. FMP will bring on their application whether you like it or not, and they can require that you co-operate in their application. On the other hand, FMP will be responsible for managing any court applications they begin. You will not have to worry about arguing the application yourself. You may be allowed to keep some of the support money which the ministry collects in addition to your BC Benefits payments; your case worker will tell you how much. You may have an understanding with your spouse or former common-law partner that no spousal support will be payable; you might not have even seen him or her for several years. Nevertheless, if your spouse applies for social assistance, you may find yourself being served with an application for an order that you pay support. This is not something that your spouse may have any control over at all. When FMP brings on an application for support, they bring it as if they were the person entitled to receive the support, and the application will be dealt with on that basis. It will be your job to fight their application, and you may want to hire a lawyer to do so. Note that you cannot defend their claim by saying "but my spouse is on welfare, she doesn't need any support from me" — that's the whole point of FMP's application; they're trying to defray the government's expenses by looking for money from someone who has or ought to have that obligation in the first place. Back to the top of this chapter. Spousal Support and Income Tax
The spouse who pays periodic support is entitled to claim the amount of the payments as a tax deduction against his or her income. The receiving spouse is consequently obliged to claim the support he or she has received as taxable income, on top of any other taxable income he or she might have, like income from employment. The total income of the recipient, support included, will be subject to taxes. Since taxes are deducted from employment income, this often means that the recipient will wind up owing money to the government rather than getting a refund. If a payor wants to ensure he or she can claim this deduction, the order or family agreement which obliges the payor to make the spousal support payments must clearly state that the payments are for spousal support, and the payments must be periodic in nature rather than paid as a lump sum. Without this clear statement, the federal Income Tax Act requires the payments to be treated as child support payments, believe it or not. Child support payments are not tax deductible for the payor, nor are they taxable income for the recipient. Lump sum spousal support payments are neither deductible for the payor nor taxable for the recipient. If you want to ensure that the money you are paying as spousal support is deductible, there are a couple of important points you must pay attention to in order to satisfy the tax man: The payment of spousal support will require the payment of additional taxes by the recipient since the money received must be reported as income. The recipient of support may also be subject to other taxes that aren't so obvious. One of the more common ways this can happen is if the payor is making the payments directly through a company he or she owns. For example say Bob, the owner of Bob's Brewery, writes his spousal support cheques on the bank account of Bob's Brewery instead of from his personal chequing account. In a case like that, the person getting the money risks having the payor declare the money to have been paid as a corporate dividend or as salary as if the recipient was an employee of the company. In the case of support declared as salary, the recipient might face an unexpected bill from EI or CPP for missed payments, as well as for underpaid tax from the Canada Revenue Agency. In the case of support paid as a dividend, the payments might be taxed at the corporate tax rate, which is generally higher than the personal tax rate. The easiest way to guard against unexpected taxes is to ensure that the payments are made by way of a personal cheque, drawn on the payor's personal bank account. When it will be difficult for a recipient to have to pay the tax owing on spousal support, a couple can agree to deal with these taxes in one of two ways: When someone pays more support, the recipient must put the extra amount aside for tax time, or his or her bill to the Canada Revenue Agency will just be that much higher. Since it can be a bit difficult to figure out how much money the recipient will have to pay in taxes, it can be a very good idea to hire an accountant to get the number right. When someone agrees to pay the taxes owing on account of the spousal support and the recipient has other sources of income, it can be very difficult to figure out exactly how much of the recipient's tax bill results from his or her reciept of spousal support. This is another good time to hire an accountant. The portion of a lawyer's bill attributable to enforcing a spousal support order is tax deductible. It used to be the case that the cost of obtaining or defending a claim for spousal support was not deductible, however the Canada Revenue Agency changed it's opinion on this in 2002, following the decision in Gallien v. The Queen: Note the difference in treatment between spousal support under the Divorce Act and spousal support under the Family Relations Act. To claim these deductions, the lawyer must write a letter to the Canada Revenue Agency setting out what portion of his or her fees were attributable to advancing a spousal support claim. If you intend to ask your lawyer for a letter like this, you must tell your lawyer as soon as possible, preferably the moment the lawyer takes your case. The lawyer will be required to keep a log of his or her time spent on the claim, and many lawyers will be unable to winnow out the parts of their bills dedicated to spousal support that were recorded long ago. Back to the top of this chapter. Site Navigation
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